Many glucocorticoid (Gc) actions are of rapid onset and therefore require acute regulation of intracellular signaling cascades. Integration of diverse extracellular signals requires cross-talk between intracellular pathways, suggesting the existence of nodes for signal interaction, such as the specialized membrane microdomains caveolae. We have identified rapid Gc-dependent phosphorylation of caveolin, and protein kinase B (PKB)/Akt, in the lung epithelial cell line A549 and found this was dependent on src kinases. There was also activation of PKB downstream molecules glycogen synthase kinase-3β, and mammalian target of rapamycin. Subcellular fractionation colocalized glucocorticoid receptor (GR) and c-src to caveolin-containing membrane fractions. Coimmunoprecipitation studies also identified interactions between GR and caveolin and suggested that the activation function 1 domain within the GR may serve to support an interaction between GR and caveolin. Disruption of lipid raft formation, impairment of caveolin function using dominant-negative caveolin, down-regulation of caveolin-1 using short hairpin RNA or complete ablation of caveolin-1 prevented Gc-induced activation of PKB. Loss of caveolin-1 also prevents Gc activation of glycogen synthase kinase-3β and mammalian target of rapamycin. In contrast, caveolin interference/down-regulation had no effect on Gc transactivation. Functional analysis of caveolin-1 knockdown and knockout cells identified profound loss of Gc-mediated growth inhibition compared with controls, with a requirement for caveolin in order for Gc to regulate cell cycle progression. Therefore, disruption of caveolae leads to dissociation of Gc action, with impaired induction of PKB activation, and cell growth inhibition, but with negligible effects on Gc transactivation. These observations have implications for understanding the diverse physiological actions of Gc.